In business, competition drives change. This is especially true for
Connexion by Boeing, Boeing's in-flight connectivity business, which
is studying opportunities triggered by a recent U.S. Federal Communications
Commission decision.

In December 2004, the FCC announced plans to restructure and open access
to the 4 megahertz (MHz) of radiofrequency spectrum allocated for air-to-ground
communications. As part of this plan, the FCC intends to license via
auction portions of the reconfigured air-to-ground spectrum to two service
providers—and permit at least one provider to offer broadband service.

A broadband version of air-to-ground service would permit in-flight
voice, data and Internet service to commercial and executive airplanes
while over the United States. Connexion officials have expressed interest
in becoming a license holder.

"Passengers want the same connectivity in the air that they have
at home and in the office," said Beverly Wyse, director of Business
Development and Strategy for Connexion by Boeing. "Carriers want—and
need—to be as efficient and cost effective as possible, both at
the gate and in flight. Broadband data transmission—internationally
and domestically—is of value to both."

Connexion by Boeing representatives said the business unit is uniquely
positioned to provide this service. It provided the world's first in-flight
high-speed information service for commercial airlines, using satellites
to provide its services over a very-high-frequency band known as the
Ku-band. Satellite service is ideal for international use and on larger
jets flying long-haul routes, as the data can be transmitted over water
and remote terrain. (The bandwidth allocated by the FCC for air-to-ground
communication over the United States, however, is in a different frequency
range than the band used by Boeing to transmit to satellites.)

Connexion representatives said air-to-ground service in the United States
would complement its international business.

For aircraft flying over the United States, broadband data transmission
could emanate from a low-cost network of towers or ground stations.

In announcing the restructuring of the air-to-ground spectrum, the FCC
said it recognized that the current air-ground spectrum allocation is
inefficient and outdated. It also said competition in the marketplace
is crucial to ensuring consumers the best service at the best price.

The FCC will license portions of the reconfigured air-to-ground spectrum
to two service providers based on the results of an auction. Its plan
ensures no single provider may acquire the entire available spectrum—and
potentially opens the air-to-ground, or terrestrial, broadband market
to multiple competitors.

"We need to do more to provide more choices and multiple platforms
for communications between the air and ground to satisfy the demand for
better, high-speed services," said former FCC Chairman Michael Powell
in a statement on the December announcement.

The FCC previously had granted licenses to six providers to operate
within that 4 MHz band; Boeing is not one of them. Because of how the
licenses were allocated, no one service provider can use its bandwidth
to provide broadband service. In fact, of the six providers, only one
company, Verizon Airfone, is currently using that space.

The outcome of the auction, expected to occur in early 2006, depends
on which businesses participate in the auction and how they approach
it. Until the auction takes place, the concept of "competition" in
the broadband mobile information service market has yet to take shape.
However, Connexion officials noted that Boeing understands the technology
and is developing the systems necessary to participate in the air-to-ground
field.

"Boeing is focused on total customer solutions and providing value," Wyse
said. "We are excited to continue to bring services to the airlines
and also to the passengers that allow them to do what they want to do,
when they want to do it."